The oversight and management of real estate comes in many forms. We are going to focus on residential property management and the 5 basic aspects that any landlord or property manager will need to master along with some helpful tips to use along the way.
An inexperienced investor looking to make passive income may think that purchasing a rental investment might only present the challenge of collecting rent. Many real estate investing programs will showboat the glory and ease of investing, without detailing the services landlords need to be successful. Whether a landlord is managing the rental themselves, or they are hiring a property manager, the landlord will benefit from learning the art of rent collection, leasing, maintenance, evictions, and reporting.
1. Rent Collection
Checks, money orders, ACH, credit card payments, visiting the property, and even having a local convenient store collect the cash for the landlord are all ways to collect rent. The obvious inconveniences arise from taking personal checks, as they might bounce and leave a hefty fee that the landlord will pass to the tenant.
Rent collection processes like visiting the property or having a local convenient store collect rent are options, but will take a lot of the landlord's time and effort to ensure that the money is where it needs to be, on time, and the right amount.
Professional property managers have systems in place to collect rent through credit card or ACH online. This allows for the property owners to get paid faster. Bonus tip: Update leases to allow for a 0-Day grace period. Rent is due on the first, and if it isn’t the landlord or manager will be allowed to take action faster, lessening the chance to miss multiple months in rent payments.
2. Leasing
Leasing rental properties isn’t always as easy as posting it online and having tenants knock down your door with applications, unless the manager or landlord knows what they are doing. Vacancies come from poor planning, poor marketing, and poor relationships.
When planning for a tenant turnover or a vacant period of any time, consider your area’s leasing season. Plan your leases to end during a good time for leasing. You can plan ahead for your vacancies and place them in prime renting season to find the best long term tenants.
Marketing can be as simple as taking photos and posting them online. To be successful in harder times of the year, take quality photos and post them in order as someone would walk through the home. Take a walk through video to show all the in’s and out’s, which will lessen the amount of showings to serious candidates only.
Build relationships with the potential tenants that you are showing the home to. You’ll get to know them better, and they’ll get to know you. If you build a good relationship, they will be more interested in applying to live in your home, or the home you are managing.
3. Maintenance
Budget for maintenance, and perform maintenance when needed. If it is in your budget, this should not be an issue. Deferred maintenance is what causes great assets to go to waste. Being responsive not only maintains your asset but maintains your tenant.
Create relationships with vendors. Use them often, and reward them for good work. Trust your vendors, but never stop verifying the quality of work they do and the response time that they employ.
Maintenance is more or less about systems. Create a system that works for you and the vendors you have built relationships with, then keep improving that system.
4. Evictions
Landlords and property managers may have to deal with an eviction- the process of expelling a tenant from your home through the use of the court systems. It’s important to know your local law when it comes to evictions.
A helpful tip is to understand the law in advance, create a flowchart of the eviction process, and then if it happens you follow the flow chart, barring any emotion from the process. Keep the same set of policies and rules in place, and go from there. With a system in place and a 0-Day grace period, a landlord or property manager may be able to evict a non-paying tenant and have new tenants in before a whole month passes.
5. Reporting
Landlording or managing properties is a business, whether you are a professional property manager, work for a professional property management company, or you are a self-manager of your own properties. Landlords and managers need to know the numbers. Having your accountant draw up a template P&L and Balance Sheet for each of your assets under management is critical.
Landlords who know their numbers will have a roadmap to making better decisions. This is up to the property manager or the landlords themselves to provide.
These 5 basics and the tips that come with them might get you started, but won’t be all that you need to know. For best practices, find the best property managers, landlords, or investors in your area and build a relationship. Ask them questions and listen about how they got started, and what kind of things you might need to know to have a successful career in real estate.
